IRS Updates Procedures For Requesting Reclassification Of Public Charity Status.

This announcement provides procedures that a section 509(a)(3) supporting organization may use to request a change in its public charity classification. This announcement supersedes Announcement 2006-93, 2006-48 I.R.B. 1017.

BACKGROUND

In the Pension Protection Act of 2006, Pub. L. 109-280 (PPA), Congress enacted a number of changes to the tax law affecting supporting organizations described in section 509(a)(3) of the Internal Revenue Code (Code). In recognition of the fact that organizations classified as supporting organizations under section 509(a)(3) might wish to seek reclassification under sections 509(a)(1) and 170(b)(1)(A)(vi) or section 509(a)(2) of the Code, the Internal Revenue Service (IRS) issued Announcement 2006-93, 2006-48 I.R.B. 1017, to provide procedures under which supporting organizations could request a change in public charity classification for reasons related to the changes made by the PPA. The IRS processed status change requests submitted under Announcement 2006-93 on an expedited basis.

On September 9, 2008, the Treasury Department and the IRS issued temporary and proposed regulations to implement the redesign of the Form 990, Return of Organization Exempt from Income Tax. 73 Fed. Reg. 52,528. The new regulations provide for the elimination of the advance ruling process and a change in the public support computation period from the four years preceding the tested year to a five year-period that includes the tested year. An organization that meets a public support test for the tested year is a public charity for the tested year and the next succeeding year. The new regulations also made changes to the method of accounting for computing public support. This announcement provides procedures consistent with the new regulations for supporting organizations to request changes in public charity classification. In addition, this announcement provides that the IRS will no longer process classification changes on an expedited basis unless the request otherwise meets the expedite criteria set forth in Revenue Procedure 2009-4, 2009-1 I.R.B. 118.

PROCEDURES FOR SUPPORTING ORGANIZATIONS TO REQUEST CHANGE IN PUBLIC CHARITY CLASSIFICATION

Organizations that are seeking to change their public charity classification from a section 509(a)(3) supporting organization to a section 509(a)(1) or (a)(2) organization should submit a written request for a determination as to public charity status pursuant to Revenue Procedure 2009-4, 2009-1 I.R.B. 118.

The request for reclassification must include the following:

This announcement supersedes Announcement 2006-93, which is revoked.

For further information, contact Melinda Williams at (202) 283-9467 (not a toll-free call).